Scheme of Amalgamation Approved Under Sections 230(6) and 232(3) of Companies Act, Effective 1 April 2021

The NCLT, Kolkata, sanctioned a Scheme of Amalgamation under Sections 230(6) and 232(3) of the Companies Act, 2013, between the transferor and transferee companies as detailed in Annexure "A" to the petition. The Tribunal, being satisfied that statutory requirements and procedural compliances were met and that the scheme was fair, reasonable, and not contrary to law or public interest, approved the amalgamation with the appointed date fixed as 1 April 2021. The company petition was accordingly disposed of.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 satisfied statutory requirements and could be sanctioned.

1.2 Whether the objections and observations of the Regional Director, Official Liquidator and Income Tax Department warranted modification, rejection, or conditions to the Scheme.

1.3 What would be the legal consequences of sanctioning the Scheme in respect of transfer of assets, liabilities, employees, pending proceedings, and dissolution of the transferor companies.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Satisfaction of statutory requirements for sanction under Sections 230-232

Legal framework

2.1 The petition was filed under Sections 230(6) and 232(3) of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016, seeking sanction of a Scheme of Amalgamation with an appointed date of 1 April 2021.

Interpretation and reasoning

2.2 The Scheme was unanimously approved by the respective Boards of Directors of all petitioner companies on 18 February 2022.

2.3 Meetings of equity shareholders of all petitioner companies and the meeting of unsecured creditors of the transferee company were dispensed with, as all of them had given consent by way of affidavits under the prior order of the Tribunal.

2.4 Notices under Section 230(5) were duly served on all concerned statutory and sectoral authorities, including the Regional Director, Official Liquidator, Registrar of Companies, Competition Commission of India, and specified Income Tax authorities; advertisements of the hearing were published in prescribed newspapers, and an affidavit of compliance was filed.

2.5 The statutory auditors of the transferee company certified that the accounting treatment in the Scheme is in conformity with the accounting standards prescribed under Section 133 of the Companies Act, 2013.

2.6 It was confirmed that no proceedings were pending under Sections 210 to 227 of the Act against the petitioners.

2.7 The share exchange ratio was based on a valuation report of a registered valuer and was stated to be fair and reasonable; the shares of the petitioner companies were unlisted.

2.8 The Tribunal noted that all statutory formalities requisite for sanction of the Scheme had been complied with and that the Scheme was bona fide and in the interest of all concerned, including through benefits of economies of scale, simplification of corporate structure, reduction of multiplicity of compliances, and elimination of duplication of administrative costs.

Conclusions

2.9 The Tribunal held that the requirements of Sections 230-232 and the relevant Rules were satisfied and sanctioned the Scheme with the appointed date of 1 April 2021, making it binding on all transferor and transferee companies and their shareholders and all concerned.

Issue 2: Effect of observations of Official Liquidator and Regional Director

Interpretation and reasoning - Official Liquidator

2.10 The Official Liquidator, on the basis of information and documents furnished, reported that the affairs of all transferor companies did not appear to have been conducted in a manner prejudicial to the interest of their members or to public interest under the Companies Act, 1956/2013.

2.11 The Official Liquidator left it to the Tribunal to pass appropriate orders.

Interpretation and reasoning - Regional Director

2.12 The Regional Director recorded that no complaint or representation had been received against the Scheme and that the companies were updated in filing their statutory returns for the financial year ending 31 March 2021.

2.13 On the RD's request for details of assets to be transferred, the petitioners undertook to submit the list/details of assets, if any, to be transferred from the transferor to the transferee company upon sanction of the Scheme.

2.14 On the RD's insistence on compliance with Section 232(3)(i) regarding payment of fees on increased authorised capital, the petitioners undertook to comply with Section 232(3)(i) upon the Scheme becoming effective.

2.15 On the RD's observation regarding payment of applicable stamp duty on transfer of immovable properties, the petitioners confirmed they would pay such stamp duty, if any, upon the Scheme becoming effective.

2.16 On the RD's request for confirmation that the Scheme annexed to the company application and company petition was identical, the petitioners affirmed that the Scheme was one and the same with no discrepancy or change.

2.17 The RD pointed out that one transferor company was under inquiry under Section 206 of the Companies Act, 2013 and suggested the Tribunal ensure that officers/directors of that company may not join the board of the transferee company. In response, the petitioners referred to clause 7 of the Scheme, confirming that all pending suits, appeals or other legal proceedings, including before statutory or quasi-judicial authorities or tribunals, would continue and be prosecuted or enforced by or against the transferee company, without abatement or prejudice, as if the Scheme had not been made.

2.18 The RD noted that a copy of the Scheme had been forwarded to the Income Tax Department and that its views were awaited; the petitioners stated that they had no specific comment as those were general statements.

Conclusions

2.19 The Tribunal accepted the undertakings and confirmations given by the petitioners in response to the Regional Director's observations and did not find any ground therein to refuse sanction. The OL's report that the affairs were not prejudicial supported sanction of the Scheme.

Issue 3: Impact of Income Tax Department's claims and pending proceedings

Interpretation and reasoning

2.20 The Income Tax Department, through the Assistant Commissioner, stated that an outstanding demand of Rs. 15,95,762/- existed against the transferee company, and that recovery proceedings were pending.

2.21 The Department requested that the petitioner be directed to clear the outstanding demand as soon as possible.

2.22 The petitioners clarified by rejoinder that the demand was against the transferee company alone, that a representation for rectification of the computation order was pending before the department, and undertook that the said demand would be paid by the transferee company as and when the representation was decided.

2.23 It was further recorded that the Income Tax Department had no objection to the Scheme of Amalgamation.

2.24 The Tribunal, in its operative directions, expressly provided that in case of any default, including under the Income Tax Act, with respect to the transferor companies, the Income Tax Department, Registrar of Companies and other statutory departments would be at liberty to initiate appropriate proceedings against the transferee company, which, after sanction of the Scheme, would be responsible for the liabilities and non-compliances of the transferor companies, and that necessary records of the transferor companies would be preserved by the transferee company.

Conclusions

2.25 The Tribunal held that the existence of the outstanding tax demand and pending recovery/rectification proceedings did not bar sanction of the Scheme, especially in view of the petitioners' undertaking and the express liberty reserved to the statutory authorities to proceed against the transferee company.

Issue 4: Legal consequences of sanction - transfer of assets, liabilities, employees, proceedings, and dissolution

Legal framework

2.26 The Tribunal applied Sections 230-232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 in framing the operative orders upon sanction of the Scheme.

Interpretation and reasoning

2.27 The Tribunal ordered that all property, rights and interests of the transferor companies be transferred to and vested in the transferee company, without further act or deed, for all estates and interests of the transferor companies, subject to existing charges, in terms of the Scheme.

2.28 All liabilities, duties and obligations of the transferor companies were directed to be transferred to and become those of the transferee company from the appointed date, without further act or deed.

2.29 All employees of the transferor companies were directed to be transferred to and engaged by the transferee company in the manner provided in the Scheme.

2.30 All proceedings, inquiries, suits and appeals pending by or against the transferor companies were ordered to continue by or against the transferee company, as per the Scheme, with a direction that necessary records of the transferor companies be preserved by the transferee company till conclusion of such inquiry/proceedings.

2.31 The Tribunal authorised the transferee company to issue and allot shares to the shareholders of the transferor companies in terms of the Scheme and, if necessary, to increase its authorised share capital, subject to compliance with Section 232(3)(i).

2.32 Leave was granted to file the Schedule of Assets and Liabilities of the transferor companies in the prescribed form (Schedule to Form CAA-7) within three weeks.

2.33 The Tribunal directed that certified copies of the order be filed with the Registrar of Companies within thirty days of receipt and that the transferor companies shall stand dissolved without winding up upon the Scheme taking effect.

Conclusions

2.34 The Tribunal concluded that, upon sanction and effectiveness of the Scheme, all assets, liabilities, employees, and pending proceedings of the transferor companies would statutorily vest in and be assumed by the transferee company, and the transferor companies would be dissolved without winding up, subject to continuing rights of statutory authorities to proceed against the transferee company for any liabilities or non-compliances of the transferor entities.

---